As an investor, we should look at avenues to diversify our investments. We often use products and services of global companies but don’t invest in them. With a new notification by NSE IFSC, we now have the option.
Guest Author: Abhinav Mishra
When we look at the US stocks, there are so many companies whose products we are using. I am sure – if given a chance, you would love to invest in them – the trust is so high, we have been using them for years – Microsoft, Apple, Amazon, Google, and many more. There was always an option to invest in US stocks, but the process was never easy. Now, it is going to be super easy. Let us look at the details.
Can you invest in all US stocks?
No, you cannot invest in all US stocks. For now, you can invest in only eight US stocks – Alphabet (Google), Amazon, Tesla, Meta Platforms (Facebook), Microsoft, Apple, Netflix, and Walmart. In the coming months, the list will increase to 50 companies.
Another point to note is that these companies will not get listed in India. So what can we buy? You can buy them through NSE IFSC. Keep reading to know the answer.
What is NSE IFSC?
NSE International Exchange (NSE IFSC) is a wholly-owned subsidiary of the National Stock Exchange of India (NSE). It has announced that Indian investors can now invest in selected US stocks that will be made available on the NSE IFSC platform. The entire trading, clearing, settlement, and holding of US Stocks will be under the regulatory structure of IFSC Authority.
What will drive buying of US stocks?
Unlike in the Indian market, you can buy fractional shares in the US. IFSC is making sure, you can avail the same benefit when you buy in India.
The Google share price is $2691 per share. It translates to over Rs 2 lakh in Indian currency. With a fractional share concept, you can invest Rs 20,000 in Google share and own nearly one-tenth share.
When you want to invest in US stock, you will place an order on the exchange. The market makers will buy the shares in the US for you and issue receipts against them. These receipts are known as NSEIFSC Receipts. Once you receive the receipt, it is a confirmation that you know the shares in the company. You can sell the receipts when you want to book profits.
Does one receipt is equivalent to one share?
No. As mentioned above, fractional buying is a need for Indian investors as they cannot purchase one complete share of most US companies. Hence, IFSC will release the receipts in a specific ratio. For example, the share of Alphabet will be equivalent to 200 NSE IFSC receipts. I assume that you can purchase shares in multiple of IFSC receipt values.
The current price of Alphabet is $2600 (approximation done), so one receipt value will be $13, so you can invest in Alphabet shares in multiples of $13.
The ratio of the remaining seven stocks is Tesla (100), Amazon (200), Meta Flatforms (50), Microsoft (50), Netflix (50), Apple (25), and Walmart (25).
In which currency can I buy the shares?
You will have to buy and sell the stocks in US dollars. It means you will place an order in US dollars and not the converted INR value. The tick size will be one cent, which means that you will be able to put a bid for the receipts in the form of $5.00, $5.01, $5.02, and so on, but not $5.004.
Can I buy shares during Indian market hours?
No, you can trade in the receipts in the US market hours. It will begin at 8 pm IST and will close at 2.30 am. The daylight savings is coming soon, so do keep a note of the timing.
How can I get started?
You now have all the information required to buy the 8 US shares. Let us try and explore how we can actually do it. You will have to open trading and Demat accounts with NSE IFSC registered brokers. Presently, 36 brokers are registered with the exchange. They are not the brokers we use to purchase Indian stocks- Zerodha, HDFC Securities, ICICI Securities. There is some clarity required here. There is no information available around the registration part with brokers.
One of the listed brokers is – EXCEL BROKING (IFSC) PRIVATE LIMITED. You will have to visit their site and open the account using this link.
How much can I invest, and what are the tax implications?
You will be able to transact on the NSE IFSC platform under the Liberalized Remittance Scheme (LRS) limits prescribed by the Reserve Bank of India (RBI). According to this framework, RBI permits Indians to remit up to $2,50,000 per financial year.
You will have to pay taxes per your slab rate on gains made within two years of purchase. If the holding period is two years, you need to pay 20% with indexation for capital gains.
We hope you are excited to read the news. However, there are still certain grey areas. We continue to monitor the progress and update you on the new information we receive on the news.